The Socio-Economic Importance of Scientific Research To Canada

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The Socio-Economic Importance of Scientific Research to Canada Page 5© David A. Wolfe and Ammon Saltercommented that, “Canada’s investment in research and development, about 1.5 percent ofCanada’s gross domestic product, remains proportionately lower than that of all other Group ofSeven (G–7) most developed countries, except Italy” (Government of Canada 1994b, p. 3).These themes are not new — they have been an integral part of the debate around science andtechnology policy in this country since the mid–1960s. Numerous advisory reports since the1960s have urged government to take the lead in improving the country’s investment in scienceand technology–related activities. While they did not always agree on the source of theproblem, nor the most effective means to overcome it, these reviews generated a large numberof incremental changes, both in institutional structures and policy initiatives over the past twodecades. Nonetheless, the basic challenge remains unmet while ongoing developments in theinternational context for science and technology intensify the pressure to improve ourperformance. 1However, the S & T Review also signaled some additional problems arising from the pressureon government to manage its fiscal resources more effectively. The consultation documentindicated a number of concerns about the direction and benefits flowing from the federalgovernment’s $7 billion in spending in this area. 2 It noted that at a time when all governmentsmust exercise discipline in their spending, the federal government needed to ensure that itsS&T activities were generating the maximum return for its social, economic and environmentalgoals. It posed two basic questions for the review: “First, given current needs, what shouldCanada do in the area of science and technology?” and “Second, given these nationalpriorities, is the federal government doing the best it can with the resources it has?”(Government of Canada 1994b, p. 8).In a subsequent part of the document, the government expanded on these themes with a moredetailed set of questions. It noted the need for the federal government to be able to set clearpriorities for the effective management of its investment in science and technology. In order todo this, it needed a clear delineation of the components and characteristics of Canada’s nationalsystem of innovation. It needed an effective assessment of the state of the country’s scienceand technology infrastructure. It also required a clear set of criteria to guide the prioritysetting among the competing investments in science and technology with the potential to create1For a useful overview of many of the themes and issues raised in these reports, cf. Dufour, 1994.2The composition of this spending is considered in more detail in the last section of the paper.5
The Socio-Economic Importance of Scientific Research to Canada Page 6© David A. Wolfe and Ammon Salterwealth and generate employment in the coming decades. It needed to deal with the issue ofmeasuring results from its investments in science and technology. And it needed to assess thecontribution made by Canada’s colleges and universities to the achievement of our science andtechnology objectives (Government of Canada 1994b, pp. 13-15).The consultation document made little reference directly to the role of scientific research in ournational innovation system or the federal government’s science and technology policy;however, the questions it posed conveyed grave implications for the current system offinancing and conducting basic research. Implicitly, it questioned whether our system of basicresearch should continue to occupy the privileged position within the innovation system that ithas traditionally been afforded. Is the level of public investment in basic research justified bythe economic and social benefits produced? How should these results be judged or evaluated?And, implicitly, it questioned whether an investment of the same level of funds in otherelements of the national innovation system would produce a higher level of benefits? Thesequestions pose a serious challenge for the current system of conducting basic scientificresearch. As we noted at the outset, the state of the literature does not provide us with readyanswers to these questions. Nonetheless, it does afford a wealth of insights into some of thesequestions and suggests a number of ways to evaluate the contribution that our investment inbasic scientific research makes to the economic and social well–being of the country. Thebody of this report presents a survey of the insights derived from these studies.THE ECONOMICS OF PUBLICLY–FUNDED SCIENTIFIC RESEARCHMuch of the problem in assessing the social and economic benefits of publicly–funded researchstems from the limitations of the models used to evaluate those benefits, including theirinability to distinguish broader social outcomes from the narrower, and more quantitative,economic ones. The traditional view of the economic benefits derived from governmentsupport for scientific research argues that government action serves to correct a market failure.The language of market failure, rooted in neoclassical economic theory, is based on theassumption that a purely market relation would produce the optimal situation and thatgovernment policy should be limited to redressing situations where market failures develop.As Metcalfe points out, this is a very demanding task to impose on policy–makers. Hesuggests that an approach based purely on the notion of market failure is insufficient fordealing with the case of science and technology policy. From this perspective. . . future markets for contingent claims in an uncertain world do not exist in any sensesufficiently for individuals to trade risks in an optimal fashion and establish priceswhich support the appropriate marginal conditions. Because the appropriate price6
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